Vice-chair of broadcasting dissents with CRTC approval of CBC radio advertising

A CRTC decision permitting advertising on CBC/Radio-Canada’s Radio 2 and Espace Musique music channels is a “double insult” to private broadcasters and the Canadian public, and risks throwing the broadcasting system into “disarray,” said Tom Pentefountas, the CRTC’s vice-chair of broadcasting. In a decision Tuesday that renewed CBC’s broadcasting licences for five years, the CRTC said the Crown corporation can air up to four minutes of national ads on its previously ad-free Radio 2 and Espace Musique networks during a three-year trial period, with ads limited to two blocks per hour “to minimize the impact on their listeners,” the decision said. Following the three year period, the CRTC said, CBC will have to request an extension to continue airing ads and prove that the advertising does not negatively affect the channels’ programming, listeners, or the commercial radio market. “Firstly, it’s a very slippery slope once the door is opened to the commercialization of public radio, and second, it seems crystal clear to me that the commercialization of Espace Musique and Radio 2 will trigger the disappearance of the distinct and complementary character of those services,” Pentefountas said in a 3,000-word, dissenting opinion. Pentefountas, who has served as the commission’s vice-chair of broadcasting since April 2011, said he could not agree “in good conscience” with a decision that could have a negative affect on the private sector radio advertising market, alienate the radio networks’ loyal viewers, and forever change the nature of Radio 2 and Espace Musique. “It gives me no pleasure to take this position, but I would like to state from the outset that I am firmly opposed to the application to amend the licences for Radio 2 and Espace Musique to allow them to broadcast advertising by national advertisers,” he said. In its licence renewal application, CBC asked for permission to broadcast up to five minutes of ads per hour on each of the radio services during the first year of its new licence, increasing each year until the fourth year, when there would be no restrictions. CBC said it would seek out new advertising dollars to target the services’ niche listeners, resulting in up to $16 million in annual advertising revenues, which the broadcaster said it needed to help offset cuts to its parliamentary appropriations, announced in March 2012 and totalling $115 million starting in 2014-2015. During a hearing on CBC’s licence renewals last November, public interest groups and private broadcasters opposed the request for radio advertising, arguing that it would cut into commercial radio and detract from CBC’s role as a public broadcaster. In all, 893 interveners filed comments with the commission objecting to CBC’s request, compared to less than 100 that supported it. In the dissenting opinion, Pentefountas dismissed the idea that advertisers would open new pools of ad funding to target CBC radio listeners and said ads on the CBC services will come at the expense of smaller radio stations’ revenues. He said the CBC music network will not generate more than $11 million in annual advertising revenues within three years, as the broadcaster said in a plan released Tuesday, and said it is “perplexing” that the Crown corporation is concerned about additional revenues of $11 million while it has an annual operating budget of about $1.85 billion. “I find it unfathomable that we’re upsetting the balance of the Canadian radio broadcasting ecosystem for $10 million in revenues in the case of Radio 2 and a few million dollars in the case of Espace Musique,” Pentefountas wrote. “As the difference seems insignificant, it is a double insult for private broadcasters and the public itself.” He said his deepest concern is that the ads will “fundamentally and irrevocably change” the nature of the two radio networks. “Listeners will perceive a deterioration in the service and will begin to tune in less and less or will stop listening altogether,” Pentefountas wrote. “They will notice that the sound has changed, increasingly resembling that of commercial radio.” In its decision, the CRTC said there is no doubt that CBC must find ways to increase ad revenues and reduce expenditures as it deals with cuts. “iven that the CBC already sells advertising on its other platforms and that sources of revenue are limited, the Commission has come to the conclusion that the only alternative to advertising would be to reduce the quality of service provided by Espace Musique and Radio 2,” the commission said. The majority decision—heard last November by Pentefountas, CRTC Chair Jean-Pierre Blais, and commissioners Elizabeth Duncan, Louise Poirier and Stephen Simpson—said any “potential financial impact” of the new ads would be limited by the “niche” nature of the two CBC radio services, which would be limited to national ads that account for roughly 30 per cent of the national radio ad market. Barry Kiefl, president of research group Canadian Media Research Inc., said in a telephone interview Tuesday that CBC will be hard-pressed to extend airing of ads on the two services beyond the three-year period. He said it would be too costly for the public broadcaster to meet the commission’s requirement for evidence. “To come back to the commission and prove that they’re not damaging the advertising marketplace, and that listeners are not affected by it, is probably going to cost the corporation $10 million,” Kiefl said. “Something doesn’t add up about it. It’s such a small amount of money … It’s as if the commission really didn’t want to give the approval.” Ian Morrison, spokesman for watchdog group Friends of Canadian Broadcasting, said the decision would end almost “40 years of commercial-free public radio in Canada” that dates back to 1975, when advertising on CBC radio was eliminated. He predicted that allowing ads on the CBC services would harm other, private-sector broadcasters, particularly those in small markets, and that those small stations will fight any CBC request to extend the licence for advertising. “What’s going to happen three years from now is the private sector is going to come back with a lot of ammo about what has happened in the last three years,” he said. “The more CBC gets into advertising, in less profitable markets in radio, the private sector will be pushed to the brink.” For CBC’s television licence renewals, the CRTC said it will require the public broadcaster to focus on providing programming of national and regional interests. It said CBC’s television services must also air 15 hours of children’s programming per week in each language and devote more of its prime time schedule to local programming. CBC’s English-language TV channels will also be required to air at least one Canadian-made feature film per month, the regulator said. The commission also hiked CBC’s requirements for more programming geared to English and French minority communities in Vancouver, Edmonton, Regina, Winnipeg, Toronto, Montreal and Moncton, among others. It added that CBC must ensure there are ombudsmen to handle public complaints about the broadcaster in each official language and “codify” nomination processes for them. Hubert Lacroix, CBC’s president and CEO, said in a conference call with journalists Tuesday that the advertising will have a minimal impact on private broadcasters’ ad revenues, equal to “less than one per cent” of the total advertising market, when the radio networks start running ads, likely this fall. “I don’t think it’s a big issue there. I don’t think many people should be concerned about this,” he said. He said the broadcaster does not yet have a strategy to target advertisers that do not normally broadcast on other radio stations, and said it a “work in progress.” “I think that the advertisers that see a person listening to our radio network as an interesting market, I hope, will jump in and use those minutes for us,” he said. Lacroix estimated the ads would generate revenues of $6 million to $9 million per year, and that the money will be invested in Canadian programming. He said the Crown corporation will not ask for ads on other ad-free radio services, such Radio One or Première Chaîne. “There is no way that we’re going to make a request for ad dollars coming from those two talk radios,” he said. In a release Tuesday, CBC said it welcomed the CRTC’s decision, which it called a “stamp of approval” on its five-year plan to focus on national, regional and digital content through 2015. —With reporting by Nicholas Kyonka at nkyonka@thewirereport.ca and editing by Simon Doyle at sdoyle@thewirereport.ca

Vice-chair of broadcasting dissents with CRTC approval of CBC radio advertising

Broadcast | May 28, 2013

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Vice-chair of broadcasting dissents with CRTC approval of CBC radio advertising

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